2016 (12) TMI 20 - AT - Central Excise

Refund - Rule, 5 of CENVAT Credit Rules read with Notification No. 5/2006-CE (NT) dated. 14.03.2006 - 100% EOU - sales commission agent services and CHA services - nexus of input services with output services - Held that - The CHA service as well as commission agent service can be undoubtedly said to be services which are availed and utilized by the appellant for the export of finished products - With regard to the issue whether the appellant is eligible for refund in respect of credit availed for earlier period, the D.O.F. No. 334/1/2010-TRU, dated.26.02.2010 clarifies the same - the status of appellant whether it is a proprietorship or partnership, 100% EOU are not criteria for rejection of refund. - Appeal allowed - Decided in favor of the assessee.

Summary

Issues:
1. Rejection of refund claim under Rule 5 of CENVAT Credit Rules with Notification No. 5/2006-CE (NT) dated 14.03.2006.
2. Denial of refund based on lack of nexus between input services and output services.
3. Rejection of refund claim due to absence of export documents for the earlier period.

Analysis:
Issue 1: The appellant contested the rejection of the refund claim filed under Rule 5 of CENVAT Credit Rules read with Notification No. 5/2006-CE (NT) dated 14.03.2006. The appellant, a manufacturer of Processed Human Hair under 100% EOU, faced a challenge regarding the non-payment of service tax on sales commission agent services. The department contended that the service tax was chargeable under the reverse charge mechanism. Despite paying the service tax and availing credit, the appellants could not utilize the credit due to their EOU status, leading to the refund claim. However, a Show Cause Notice was issued proposing to reject the claim as time-barred and lacking nexus with the export of goods.

Issue 2: The rejection of the refund claim was primarily based on the argument that the input services, including sales commission agent services and CHA services, did not have a nexus with the export of goods. The Commissioner (Appeals) upheld this rejection, emphasizing the absence of export documents for the earlier period. The appellant, supported by legal counsel, argued that the denial of the refund was unjustified, citing Circular/D.O.F. No. 334/2010-TRU and relevant case laws to assert the eligibility for credit and subsequent refund. The appellant contended that both sales commission agent services and CHA services were utilized for exporting finished products, thus establishing a clear nexus between the input services and the export activity.

Issue 3: The absence of export documents for the earlier period was a key factor in the rejection of the refund claim. However, the appellant relied on Circular/D.O.F. No. 334/2010-TRU, which clarified the refund of accumulated credit for past periods. The Circular highlighted the amendments in Notification No. 5/2006-CE (NT) to facilitate the refund process for exporters, emphasizing that refund claims should not be limited to a specific period but calculated based on the export turnover ratio. The Tribunal, considering the legal provisions and precedents, concluded that the rejection of the refund claim based on the absence of export documents for the earlier period was unwarranted.

In the final judgment, the Tribunal set aside the Impugned Order rejecting the refund, ruling in favor of the appellant and granting eligibility for the refund. The decision was based on the established nexus between the input services and the export activity, supported by legal interpretations, circulars, and retrospective amendments to relevant notifications. The status change of the appellant from proprietorship to partnership to 100% EOU was deemed irrelevant for the refund eligibility, emphasizing the legal backing provided by Circular/D.O.F. No. 334/2010-TRU and related judgments.